Despite Fears, New Renewables Are Not Bankrupting California

Until recently, the potential rate impact of all the new contracts for renewable energy being added to meet California’s Renewable Portfolio Standard since 2006 has been a matter of some concern. According to the Division of Ratepayer Advocates in early 2012, an estimated $20.8 billion will have been spent in California on contracts for new renewable generation by 2020, and the rate impact was a big unknown.

But last month PG&E chief executive officer Anthony Earley estimated that the first of these new contracts now delivering renewable power to the grid will likely add only 1 percent to 1.5 percent to PG&E ratepayers’ household bills. This is a startlingly low impact. With the average California household paying $100 a month, another dollar or so is a fairly negligible addition; the sort of variation in bills that is really just noise.

The estimate is also surprising from a technical point of view. Renewables like solar and wind represent a relatively new technology at utility scale, and haven’t had the decades of persistent government support to back them the way that traditional energy had. Throughout the 1980s and ’90s, the Department of Energy led R&D into fracking, which has led to the current glut in natural gas recoveries, and federal legislation has long allowed pass-through investment in fossil energy through favorable tax treatment via Master Limited Partnerships.

So for new technologies that have only recently operated at commercial scale, a rate impact of just 1 percent seems very low.

“What Tony said is correct,” said PG&E’s Denny Boyles. “We’ve forecast all along that adding the renewables to our portfolio would increase rates by 1 percent to 2 percent a year through 2020. There’d likely be some years where as different projects come online there’d be some lower, some higher, but we are still confident we’ll still fall within that rate.”